Archive for 2010

Oil Drilling Liability Cap Led To The Gulf Spill

Oil Drilling Liability Cap Led To The Gulf Spill

Courtesy of Jeff Harding, The Daily Capitalist 

oil spill

I never ever thought I would agree with Nancy Pelosi on anything, yet here it is:

U.S. House Speaker Nancy Pelosi said Congress should consider eliminating any cap on the damages a company such as BP Plc might have to pay for harm caused by oil spills.

“There is a movement afoot in Congress for that. Why have a cap?” Pelosi said in an interview on Bloomberg Television’s “Political Capital with Al Hunt” to air this weekend.

Pelosi had previously voiced support for a proposal under consideration to raise the existing $75 million cap to $10 billion for economic damages caused by each environmental disaster. After being thwarted March 13 in the Senate, backers of that legislation have vowed to renew efforts to win passage.

“You would hope that there would not be more than $10 billion of damage, but understand it is for each episode,” she said. Asked about eliminating the cap altogether, Pelosi said: “I think it’s worthy of looking at.”

I’m not against Big Oil, Little Oil, or anyone in the Oil Patch, but the liability cap is just another example of how industry uses the government to gain market advantages at the expense of someone else. In this case it is the Gulf Coast inhabitants and those that live off of that huge resource.

As I understand the law, BP is responsible to pay 100% of the cost of the clean-up. What the liability cap does is to cap economic damages to $75 million. What that means is if anyone suffers a loss of income or property as a result of a spill, BP is only obligated to pay $75 million even though the losses may be in the billions. That is not right.

Businesses seeking advantages from legislators is not news. While lobbying is often a proper and necessary response of business to legislation that would be harmful to them, it is a two-edged sword when they try to gain economic or competitive advantage. Our history is full of examples, most recently, tire import tariffs. While it is right to condemn business for this we should blame legislators who have the primary duty to act…
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What You Can Do To Bring Wall Street Under Control

What You Can Do To Bring Wall Street Under Control

Courtesy of Robert Reich  

The most important remaining battle to rein in Wall Street is over Senator Blanche Lincoln’s measure to stop the big banks from being subsidized by taxpayers for their risky derivative trades. Miraculously, it’s still in the bill but it’s on life support. The bill has now gone to the conference committee where differences between the House and Senate bills are to be ironed out.

But official Washington (read: dependent on Wall Street for money) is dead set against it. Even Barney Frank — who Massachusetts voters used to consider a reliable progressive until he became chair of the House Financial Services Committee — has vowed to kill Lincoln’s provision. And the White House says the measure is “not core,” which in Washington-lingo means “you’re free to dump it.”

Big, big money is at stake.  Wall Street’s five largest banks have a corner on the trade, raking in about in about $30 billion in over-the-counter derivatives last year. It’s the single largest reason they’re too big to fail. So they’re spending like mad on Washington lobbyists and campaign donations in order to keep the subsidy in place. (Lincoln’s provision doesn’t force them to give up derivative trading, by the way; it only forces them to do it in a separate entity that doesn’t get subsidized by deposit insurance or the Fed’s discount window). 

All the guns are aimed at this measure. But it’s still possible that the people can prevail, if we’re organized and active. Here’s a list of all the Dems on the Senate Banking and House Finance Committee, as well as Republican conferees. All conferees are indicated by ->. 

Organize and mobilize your friends and acquaintances, especially those who live in these states or districts, to call their members and make their voices heard. Tell them you want Lincoln’s measure (Section 716 of the Senate bill) to remain in the final bill. Say you’ll hold them responsible if it goes. 

Alabama -> Senator Richard C. Shelby (202) 224-5744

Arkansas -> Senator Blanche Lincoln (202) 224-4843

California -> Rep. Maxine Waters (202) 225-2201 (California-11)
Rep. Brad Sherman, CA (202) 225-5911
Rep. Jackie Speier, CA (202) 225-3531
Rep. Joe Baca, CA (202)225-6161

Colorado -> Senator Michael Bennet (D-CO) (202) 224-5852
Rep. Ed Perlmutter, CO 202.225.2645

Connecticut -> Chairman Christopher J. Dodd…
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Mr. Denninger and Gold or Why the Dollar-Deflationists Are Wrong

Courtesy of Gordon_Gekko

via Gordon Gekko’s Blog

Those who know Mr. Denninger know that he, well, for lack of a better word, hates Gold. It only goes to show the level of disinformation and ignorance prevalent in our society when even smart people like Karl fail to get it. From what I hear anybody even mentioning the word Gold runs the risk of being permanently banned from one of his “forums”. In a recent commentary entitled “Ten Things for 2010″ he was at it again bashing Gold. Here is what he had to say:

We’re not looking at hyperinflation folks, in my view – we’re looking at a deflationary collapse…If you fear hyperinflation do not look to Gold, instead buy a small (5% of your total portfolio) position in far out of the money LEAP CALLS on the major indices, spread across them.  Why?  Because (1) the tax structure on gold is unfavorable, (2) gold has never performed well on a contemporary basis .vs. inflation and (3) you can’t eat it.  If you try to get around the tax man structure you’re going to get creamed; governments can and WILL prevent that from working.  My recommendation thus is to buy insurance against a hyperinflationary event using instruments that do not try to evade the formal financial structure, are levered (to get around the tax hit) and are defined risk (so as to avoid losing your ass if you’re wrong.)

Really Karl? LEAP Calls? In a hyperinflation? That’s a good way to lose 5% your portfolio. I’m assuming you know what hyperinflation is – in a hyperinflation the currency becomes worthless, as in toilet-paper. Why would anyone want to get paid their “winnings” in a worthless currency, assuming there are stock indices and counterparties left who can pay off these worthless winnings when countries collapse? 

And the tax structure is FAR more favorable for Gold than ANYTHING else, if only you are not in the habit of bending over. Buy cash and keep your mouth shut – it’s very simple – or just move to another country where the government is not as intent on raping its citizens. I know privacy is a foreign concept in America these days, but still. All your other assets, including stock market profits, are fully open to the government and there…
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Dylan Grice Finds Value Within The Printing Orgy

Courtesy of Tyler Durden

This weekend’s must read note, from SocGen’s Dylan Grice – Print baby, print… emerging value and the quest to buy inflation

 





Russell Napier On When To Expect The Treasury Bubble Crash

Courtesy of Tyler Durden

A week ago at the CFA Institute’s 2010 Annual Dinner, Baupost’s Seth Klarman stole the spotlight by announcing to everyone that he was “more worried about the world than ever” while making it clear that he was on the same Jim Grant and Julian Robertson “Treasury put” bandwagon. Yet another speaker present at the event, who undeservedly received much less attention, was CLSA’a Russell Napier, who has long been warning about precisely the thing that all asset managers are realizing rather belatedly, that Treasuries are a very “fundamental asset bubble.” The only relevant questions, which Napier has previously discussed extensively, are “when do treasuries crash” and “what do you do” when that happens. The attached presentation provides some color on both. 

Russell Napier, whose Anatomy of the Bear (available for a pdf-special $3.95 steal on DocStoc) is one of the better market analysis books available, had one quite insightful observation. As the CFA noted in its press release on the matter, “One point that Mr. Napier made toward the end of his  presentation was that the difference between current borrowing and previous peaks in government debt is that previous surges in the debt load were linked with the financing of conflict. As he put it, the current borrowing is to keep people alive rather than to kill. The implication for the global economy of this key difference is that social programs to subsidize a certain quality of life are not a profit-making endeavor in the same way as traditional twentieth century conflicts.” We wish we were as sanguine about this conclusion as Mr. Napier. With a rapidly deteriorating geopolitical situation in both the Middle and Far East, perhaps the massive entitlement spending has been nothing short of a diversion from the the traditionally massive “defense” spending. After all, there have been over $257 billion in defense vendor payments by the US Treasury since October, an outlay smaller only than Social Security Outlays and Medicare.

And since Napier’s perspective has been largely ignored by the Mainstream media, we provide a link to his most recent comprehensive presentation on the topic of the Treasury bubble from earlier this year. In it, Napier takes (apriori) on a point made last week by Albert Edwards, an states that “balance of payments is key, not current account” pointing out that…
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Investor Sentiment: The Fat Pitch

Courtesy of thetechnicaltake

 

I am not a baseball person, but we all know what a “fat pitch” is. It is an easy one to hit. It doesn’t mean you will always hit it or even get a homerun, but if you see a “fat pitch” coming, you better take a swing.  Investor sentiment has turned bearish here, and this is our “fat pitch”. This is a bullish signal because if the market turns higher, we are likely to see accelerated gains over the time that investors are bearish.

{to view larger charts just click on them}

 

Investor Sentiment 5.30.10





Guest Post: Preparing For What's Next

Courtesy of Tyler Durden

Submitted by David Galland of The Casey Report

Oh, what a tangled web we live in.

On one side of the Atlantic, there is a fundamentally broke European Union. On the other, the world’s largest debtor nation, these United States.

Rotate the globe and you discover China, the world’s most populous nation: a nation whose economy is desperately dependent on export revenues, without which its government may find it hard to meet the population’s soaring aspirations. And who is China’s largest trading partner? The European Union, that’s who.

The web also encompasses the role that the U.S. dollar plays in the relationship between the European Union and the Chinese. Or, more specifically, the role the peg plays that China maintains with the U.S. dollar. As long as the U.S. dollar is weak, the Chinese yuan is weak and therefore competitive in European markets.

The problem now is that, with the euro falling, in order to remain competitive, Chinese companies must reduce their margins. Therein lies the rub, because the razor-thin margins of the Chinese companies – estimated to be on the order of just 2% — face the very real danger of thinning to the vanishing point. After which the best a Chinese company will be able to hope for is to make up its losses on volume.

That was a joke.

It gets more tangled. Because as the euro falls, the competitiveness of eurozone companies on world markets rises, adding further pressures on the trade that China so desperately needs (and that the U.S. would like more of as well). In this race to the bottom that the editors of The Casey Report have been warning of, the latest leg goes to the Europeans, though no conceivable improvement in their exports will offset the crushing debt burden that is now laying the continent low.

While this chapter in the unfolding saga may not end with the phrase, “And so it was that the eurozone collapsed and its common currency passed into the annals of history,” as this chapter is still being worked on, it could end that way.

Likewise, with China’s #1 market on the thin edge of becoming uneconomic, so, too, the current chapter might end with the myth of the Chinese miracle being shattered. And the U.S.?

To get to a rational assumption about the U.S.,…
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Guest Post: Preparing For What’s Next

Courtesy of Tyler Durden

Submitted by David Galland of The Casey Report

Oh, what a tangled web we live in.

On one side of the Atlantic, there is a fundamentally broke European Union. On the other, the world’s largest debtor nation, these United States.

Rotate the globe and you discover China, the world’s most populous nation: a nation whose economy is desperately dependent on export revenues, without which its government may find it hard to meet the population’s soaring aspirations. And who is China’s largest trading partner? The European Union, that’s who.

The web also encompasses the role that the U.S. dollar plays in the relationship between the European Union and the Chinese. Or, more specifically, the role the peg plays that China maintains with the U.S. dollar. As long as the U.S. dollar is weak, the Chinese yuan is weak and therefore competitive in European markets.

The problem now is that, with the euro falling, in order to remain competitive, Chinese companies must reduce their margins. Therein lies the rub, because the razor-thin margins of the Chinese companies – estimated to be on the order of just 2% — face the very real danger of thinning to the vanishing point. After which the best a Chinese company will be able to hope for is to make up its losses on volume.

That was a joke.

It gets more tangled. Because as the euro falls, the competitiveness of eurozone companies on world markets rises, adding further pressures on the trade that China so desperately needs (and that the U.S. would like more of as well). In this race to the bottom that the editors of The Casey Report have been warning of, the latest leg goes to the Europeans, though no conceivable improvement in their exports will offset the crushing debt burden that is now laying the continent low.

While this chapter in the unfolding saga may not end with the phrase, “And so it was that the eurozone collapsed and its common currency passed into the annals of history,” as this chapter is still being worked on, it could end that way.

Likewise, with China’s #1 market on the thin edge of becoming uneconomic, so, too, the current chapter might end with the myth of the Chinese miracle being shattered. And the U.S.?

To get to a rational assumption about the U.S.,…
continue reading





Guest Post: The Path To Hyperinflation

Courtesy of Tyler Durden

Submitted by Jordan Roy-Byrne of Wall St Cheat Sheet

As we’ve discussed recently, persistent deflationary forces do not augur for a repeat of Japan circa 1990s or the US in the 1930s. Instead, because of the inability of governments to finance their current and future debt burden (there is a dearth of domestic savings and global capital), deflationary forces will ultimately lead to severe inflation or hyperinflation. In today’s missive, we explain how this will happen but in various stages.

In the first stage, the economy enters a recession after a large credit bubble. The recession and end of the credit bubble lead to deflation. As a result, the US Dollar and US Treasuries outperform. Think 2008.

Policy makers (a term for interventionist bureaucrats) then provide stimulus via monetary easing and deficit spending. Gold (NYSE: GLD) and gold stocks (NYSE: GDX) outperform with silver not far behind. Think late 2008 to early 2009.

The economy gets a bump from the stimulus and economically sensitive markets such as commodities and stocks outperform. Think 2009.

This brings us to where we are now. The market is starting to sense that Europe’s debt burden is too high as its economies struggle to recover under the weight of excessive debt. The market is beginning to sense a rising probability of default. Precious metals are soaring against the Euro, the Pound and the Swiss Franc.

Meanwhile, with money moving back into US Treasuries, the US will have the ability to attempt another stimulus and announce further quantitative easing.  Europe is currently ahead of the US on its track to currency depreciation, rising inflation expectations, and rising CPI/PPI. The US still has time before the market begins to worry about its debt burden.

The next stage is the transition from the initial outbreak of price inflation to severe inflation. Inflation accelerates due to a loss of confidence in governments and currencies. A failed economic recovery leads the market to realize that the debt burden is too large and will ultimately be defaulted upon or inflated away. At this juncture, all commodities begin to perform well again. It may take anywhere from six to 18 months for this stage to be evident.

Finally, inflation is exacerbated as supply shortages emerge. Tight credit restricts new production and consumers begin to hoard. During such a period, precious metals and commodities will continue…
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Another Fin. Reg. Failure

Courtesy of Bruce Krasting

The following graph is derived from data in Fannie Mae’s most recent monthly report. It compares the default rate experienced by Fannie on its book of conforming loans to the default rate on “enhanced” loans. The enhanced default rate is 4Xs higher than the regular default rate. Enhanced loans have performed very poorly over time.

When a Fannie loan goes bust there are many economic losers including:

-The borrower will likely lose the property and suffer a variety of losses.


-The lender (Fannie) will lose money.


-The taxpayers pay for all of the losses at Fannie.


-The process of foreclosure causes RE comps to fall and results in devaluation of values in communities, towns, cities, states and ultimately the whole country.


-As RE values decline so does the tax base of municipalities. This adds pressure on state and local government’s finances. The response is to cut expenses. Very often these cuts come from school budgets. Exactly the worst place for cuts to come from if a country was trying to stay competitive in a global world.

The collateral damage of defaults is much larger than the loss incurred by the lender. It cuts across society and the economy. Our country desperately needs policies that reduce the cycle of default. Until the default rates return to the historical mean there can be little hope of a sustained economic recovery. Our private financial institutions will continue to be suspect. The process of the FDIC closing banks every Friday will not stop. The public lenders, Fannie, Freddie and FHA will continue to run up big losses. It will go on for years. The collateral damage will cripple towns, cities and states. As RE values decline individual wealth will go down and with it will go consumption.

For me the most remarkable thing about this is that the Fin. Reg. proposals do not even mention the mortgage insurance (MI) industry. The proposed new rules take a shot at re-regulating the banks, it provides some protection to consumers from predatory lending, it sort of addresses concerns regarding derivatives. But it does not touch the MI providers. How could that be possible?

There are (at least) two reasons for the carve out of MI in the Fin. Reg.


continue reading





 
 
 

Phil's Favorites

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, Thomas Jefferson University

Over the past few years direct-t...



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Zero Hedge

WTI Extends Losses After Smaller Than Expected Crude Draw

Courtesy of ZeroHedge. View original post here.

Oil prices plunged today as Trump and Pompeo defused some tensions with Iran and geopolitical risk premiums were squeezed out suddenly.

“Bullish catalysts are in short supply,” analysts at London-based broker PVM Oil Associates Ltd. said in a note to clients.

“The Gulf Coast of Mexico hurricane premium is fading as offshore operations in the region resume. At the same time, the U.S. shale engine continues to give oil bulls a sleepless night.”

API

  • Crude -1.401mm...



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Kimble Charting Solutions

U.S. & Euro Financials Lagging Big Time! Should Stock Bulls Be Concerned?

Courtesy of Chris Kimble.

Historically its been positive to see Financials doing well at the same time the broad market is pushing higher! If financial stocks are lagging bit time, should stock bulls be concerned?

This chart compares banks and in the U.S. (XLF) & Europe (EUFN) to the S&P 500 over the past 18-months.

Currently, XLF is lagging the S&P by more than 11...



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Insider Scoop

Earnings Scheduled For July 16, 2019

Courtesy of Benzinga.

Companies Reporting Before The Bell
  • Goldman Sachs Group Inc (NYSE: GS) is projected to report quarterly earnings at $5.00 per share on revenue of $9.13 billion.
  • Domino's Pizza, Inc. (NYSE: DPZ) is expected to report quarterly earnings at $2.02 per share on revenue of $836.92 million.
  • JPMorgan Chase & Co. ...


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Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



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Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

Reminder: We're is available to chat with Members, comments are found below each post.

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



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ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

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Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



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Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



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Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



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OpTrader

Swing trading portfolio - week of September 11th, 2017

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



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Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

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About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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